Wells Fargo raises Dollar Tree stock price target to $105 from $90

Wells Fargo increased its price target on Dollar Tree (DLTR) to $105 from $90, maintaining an Overweight rating, citing improved same-store sales and diminishing Family Dollar headwinds; the firm projects normalized earnings in the mid-$6 range by 2026. Other analysts have also raised price targets, noting strategic initiatives like new store openings and technology investments, while KeyBanc highlighted recent price increases and raised its 2025 EPS estimate to $4.65. However, Morgan Stanley remains cautious, maintaining an Equal-weight rating due to potential tariff impacts, and anticipates a comparable store sales increase of around 4% for the first quarter of 2025.

Analysis

Wells Fargo analysts have increased their price target for Dollar Tree (NASDAQ: DLTR) to $105 from $90, maintaining an Overweight rating, citing expectations of continued positive momentum driven by improved comparative sales and a diminishing operational drag from the Family Dollar segment; the stock has already demonstrated impressive momentum with a 24% gain over the past six months. This positive outlook is underpinned by Dollar Tree's ability to sustain its margin structure despite tariff challenges and its potential to evolve into a high single-digit to low double-digit earnings growth company, with analysts forecasting normalized earnings in the mid-$6 range by 2026. Supporting this view, InvestingPro data indicates seven analysts have recently revised their earnings estimates upward, and their analysis suggests the stock, currently trading at $90.26 with a P/E ratio of 18.75 and annual revenue of $17.58 billion, is undervalued. Other financial institutions share a generally positive sentiment: CFRA raised its 12-month price target to $92, referencing effective tariff risk management and the strategic decision to divest the underperforming Family Dollar segment. Telsey Advisory Group increased its target to $95, highlighting new store openings and technology investments. KeyBanc Capital Markets noted recent price hikes on certain items from $1.25 to $2.00 and raised its 2025 EPS estimate to $4.65, reflecting strong first-quarter performance. However, Morgan Stanley maintains an Equal-weight rating, expressing caution over potential tariff impacts on profitability and anticipating a comparable store sales increase of around 4% for Q1 2025, while also noting the company might miss EPS estimates for that quarter. The planned divestiture of Family Dollar, with Duncan MacNaughton announced as its future Chairman and CEO, is expected to finalize in Q2 2025, reflecting a significant strategic adjustment.

Key Decisions for Investors

• Investors should consider the consensus bullish analyst sentiment, particularly Wells Fargo's $105 price target and Overweight rating, which, combined with recent upward earnings revisions and the stock's 24% six-month gain, suggests potential for further appreciation.
• It is advisable to closely monitor Dollar Tree's upcoming Q1 2025 earnings report for actual comparable store sales figures, commentary on tariff impacts, and any deviations from EPS expectations, as Morgan Stanley has highlighted potential risks in these areas.
• The progress and successful completion of the Family Dollar divestiture by Q2 2025 should be tracked as a key catalyst that could positively impact Dollar Tree's margin structure and overall financial health by allowing greater focus on its core operations.